Global CEOs need to be ‘proactive not reactive’, survey reveals
Global CEOs have adopted a positive outlook for the coming financial year in the M&A market and are looking to make more acquisitions, according to an EY survey.
The latest results from the EY CEO Outlook Pulse survey reflected CEOs globally remain confident about economic growth prospects over the next 12 months.
Knowledge and experience of current economic challenges are expected to bolster M&A activity for the coming financial year, based on the survey results.
The survey consisted of 1,200 executives from around the globe and included a global CEO confidence index.
Results from the EY survey found 69 per cent of the respondents are “feeling optimistic” about the global outlook for the coming year.
EY said global CEOs need to shift their perspective from “reactive to proactive” if they want to maximise opportunities during the current tough economic conditions.
The confidence of the global leaders highlighted through the survey comes after they have continued to face significant challenges in countless areas.
“CEOs remain confident even though they have been challenged on multiple fronts as they continue to navigate the complexities of an unpredictable and volatile business environment, shaped by emerging technologies, shifting consumer behaviour and an uncertain geopolitical landscape,” EY said.
It was demonstrated respondents are struggling to keep pace with the fast-moving external environment.
According to the survey, only 38 per cent of CEOs consider themselves ahead of the curve in effectively handling the current economic challenges, while most said they are behind when it comes to “addressing industry disruption”.
Despite challenges, M&A activity is expected to be boosted through positive CEO confidence, combined with a realistic understanding of the risks and results stemming from external disruptive forces.
EY said more than 37 per cent of respondents plan an acquisition in the next year, and 59 per cent of the most confident plan to buy assets, compared to just 16 per cent of the least confident.
“More than 78 per cent of the most confident CEOs reported that they are proactively assessing their portfolio in line with their core strategy as they adapt to disruptive forces and 98 per cent plan some form of transaction over the next 12 months,” the big four company said.
The survey highlighted that most CEOs recognise the need for change in conventional portfolio review processes in order to stay ahead.
CEOs also acknowledged traditional strategic planning and portfolio management are no longer effective.
This was demonstrated by the results as 24 per cent of respondents report that portfolio reviews are not aggressive enough and 23 per cent find the process too reactive.
To manage this, CEOs said they will adopt a more flexible and proactive approach to their portfolios to fast track innovation and transformation to stay ahead of the competition.
EY global vice chair of strategy and transactions Andrea Guerzoni said CEOs need to begin the proactive shift now in a bid to get ahead and capitalise on the disruptive forces at play.
“Today’s business leaders are acutely aware of the prospects and risks associated with the disruptive forces shaping the commercial landscape,” he said.
“A combination of pragmatic optimism and a fear of being left behind is expected to drive investment and activity over the coming months.”
EY said transactions are expected to “hold steady” over the coming months due to strategic alliances, joint ventures and divestments.
According to the survey, 47 per cent of CEOs plan to actively pursue a strategic partnership with a third party in the next 12 months, and 44 per cent will chase divestments or IPOs, and 37 per cent will prioritise M&A.
Issues of the CEO agenda will shape CEO activity over the coming year, said EY.
These disruptions include emerging technologies, new business models and competitive advantage, changing customer needs, the altering global and political environment, changing regulation and supply chain pressures.
Guerzoni said CEOs should utilise these disruptions and renewed confidence to make the most of the market.
“Transactions and deals are expected to remain consistent over the coming months as CEOs aim to keep pace with the changing external environment,” he said.
“Propped up by renewed confidence and a deeper understanding of the dynamic issues at play, CEOs will prioritise the disruptive forces that will deliver growth and are expected to target developed investment destinations that will help drive speed and ease.”
